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Something has to give on federal, state levels

By Dan Juneau -   Jul 22, 2010

Something has to give. The federal government has run up obscene budget deficits, yet Congress and the Obama administration continue to push for more spending.

State and local governments are financially strapped and must prepare for the loss of the federal stimulus money that the federal government has sent them to help balance their budgets for the last two years. Governments at the federal, state and local levels have been resisting the need to make deep spending cuts. Instead, many have passed higher taxes on their constituents and all have waited for the illusive economic recovery that never quite seems to arrive.


Yes, something has to give. At the federal level, the massive new health care legislation is certain to increase the federal deficit going forward and drive up health care costs for the majority of Americans who are already paying through the nose for health insurance premiums. Beginning January 1, a massive tax increase will hit many Americans when the Bush tax cuts expire. If the Obama administration keeps its promise to maintain the tax cuts for all American families earning less than $200,000 a year, the deficit will increase since that calculation is not included in the current budget proposal. Even if every dime of the Bush tax cuts were removed, it wouldn’t begin to make a dent in the budget deficit going forward. Cut entitlement spending? That is the last thing the current crop of politicians on the Potomac will do. Brace yourself for the massive value added tax - - in essence a national sales tax on everything - - that will soon be debated in Washington.


At the state level here in Louisiana, things are no better. After wildly overspending in 2007 and 2008, our elected officials have done little to get expenditures in line with revenues during the last two legislative sessions. Instead, they plugged the budget with $1.5 billion each year in federal stimulus money to keep spending levels artificially high. They, too, appear to have been praying for a quick economic recovery. Unfortunately for them, something happened in late May that will make a bad fiscal situation worse for Louisiana.


The Obama administration’s offshore drilling moratorium is going to have a substantial impact on jobs, the economy in general, and state and local government revenues going forward. That hard reality now teams up with the expiration of federal stimulus money to turn a dismal state fiscal situation into a horrendous one. As previously noted, the current legislature and administration have cut precious little in comparison to the unsustainable levels of spending. There is little evidence from them that they have the will to cut more going forward.


The only alternative to cuts is higher taxes. The problem with the higher tax scenario is that the taxpayers of Louisiana have had to do with less for the last few years while state government maintained its unrealistically high levels of spending. The public is likely to have little sympathy toward paying more money to a state government that doesn’t live within realistic revenue expectations.  They will most likely have the attitude expressed in a recent Rasmussen Poll in which only 19 percent of Americans said they would be willing to pay higher taxes to prevent the layoff of state employees.  Plus, the voters and the Legislature know that state elections are in 2011.


Something has to give. Government spending and deficits have gotten out of control. Politicians don’t have the courage to cut and are fearful of increasing taxes. In the coming months fiscal train wrecks are going to break out all over America thanks to the irresponsibility of the people we elect to represent us. They will receive little sympathy from the taxpayers.

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